In this section, you will learn how to measure a company’s ability to pay its current and long-term obligations using financial health ratios. You will learn how to calculate and interpret liquidity ratios, such as the current ratio and the quick ratio, which indicate how well a company can meet its short-term debts. You will also learn how to calculate and interpret solvency ratios, such as the debt-to-equity ratio and the interest coverage ratio, which indicate how well a company can manage its long-term debts. You will also learn how to identify the signs of financial instability and bankruptcy risk in a company, and how to avoid investing in such companies.